How alcohol taxation can improve health outcomes

Alcohol misuse is one of the growing public health epidemics of this century and taxation can encourage a healthier and more responsible lifestlye for drinkers.

At the end of November, the Treasury announced the conclusions from its review of alcohol taxation. The government intends to introduce a new additional duty on beers over 7.5% alcohol by volume (abv) in strength. It hopes this will help address consumption of cheap, “super strength” lagers that it associates with high and dangerous levels of alcohol consumption.

The reforms will also introduce a reduced rate of duty on beers produced at an alcohol strength of 2.8% abv or below. This measure will help encourage the production and consumption of lower strength beers and give responsible drinkers additional choice. These are very similar measures to those we proposed last year, with our report, Hitting the Bottle.

But why are these reforms being made, and will they work to address excessive consumption and improve public health outcomes?

Over the past 15 years, alcohol consumption in the UK has increased by 22%. But at the same time, consumption per person has fallen in Italy by 37%, in France by 27% and Germany by 29%.

Not only does the UK now drink more alcohol than that of the EU average, but we also have higher death rates from liver disease and cirrhosis.

There is little doubt that alcohol misuse is one of the growing public health epidemics of this century. The scale of the problem is huge, with 7.6 million people in England drinking at hazardous levels, 2.9 million showing evidence of harm to their own health, and 1.1 million people who have a level of alcohol addiction.

Between 2001 and 2007, the direct NHS costs from alcohol misuse nearly doubled, increasing from £1.47bn to £1.7bn. Acute admissions to hospital as a result of people being drunk have doubled in a decade and there is concern this dramatic rise will translate into future increases in complex and costly NHS treatments.

So what should the government do about it, and why is there such a focus on the price of alcohol?

Evidence suggestions that there is a clear and consistent relationship between the price of alcohol and its level of consumption. A wealth of data demonstrates that, at a population level, increasing the price of alcohol through taxation reduces consumption, alcohol related harm and overall costs to society.

The effects of price changes on alcohol consumption are also more effective than other alcohol policy interventions, such as restricting the number of outlets, or bans on advertising or price promotion.

Beer in the UK is currently levied at a flat rate per unit - so stronger beers attract a higher rate than lower-strength beers. But a flat duty regime provides no incentive for producers to make, or consumers to drink, products containing less alcohol.

The case for such an incentive is overwhelming, as only small reductions in per cent abv are required to produce relatively large reductions in overall pure alcohol consumption. For example, a reduction in the average alcohol content in a pint of beer by just 1 per cent abv from its current average level of 4.2% to 3.2% would effectively reduce its pure alcohol content by 22%.

The government’s proposals are a very positive step in the right direction and will undoubtedly have some demonstrable impact on levels of hazardous drinking. However, they will only affect a small minority of manufacturers and consumers - predominantly those who make and consume super-strength lager.

The real prize from an approach to taxation which differentiates between low and high strength products could be much greater - including significant improvements in overall public health.

In Hitting the Bottle, we proposed that duty should be cut on beer and cider where the alcoholic strength is less than, or equal to, 2 units per pint (up to 3.5% abv) whereas duty should be raised for beer and cider where the alcoholic strength exceeds 2.5 units per pint (over 4.4% abv). These changes would, on a much larger scale, encourage the production and consumption of lower strength alcoholic beverages and reduce population level alcohol consumption.

Now that the principle of such an approach has been firmly established by the Treasury, we hope that the government can be persuaded to go further in the run-up to the 2011 budget and in the years ahead.

Max Chambers is senior research fellow at Policy Exchange, leading the health and social care programme.

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